5 Simple Ways to Improve Your Credit Score

Hi everyone! I am out of town this week, but please enjoy this guest post on ways to improve your credit score by Jack Ryder from SimpleThriftyLiving.com.

If you are like most Americans, you are constantly trying to find ways to improve your credit score. Over 75 percent of Americans have a credit score below 700, which is bordering on the “fair” or “average” range. That means there is a lot of room for improvement in credit scores for many of us. If you are anxious to find ways to improve your credit score- and maybe see it get up above that 700 mark- here are some easy ways to improve your credit score.

Note: This post may contain affiliate links.

However, in order to improve your credit score, it helps to first know what your score is! If you don’t know your score, you can order it through a site like myFICO.com. When you order your credit score, there are options to sign up for credit monitoring and other services, but you do not have to add the extras. You can just order your score.

You can also go to annualcreditreport.com to order your free credit reports, and you can do this once per year. However, you do not usually receive your actual credit score here, just the reports.

Ways to Improve Your Credit Score

Pay Off Credit Card Debt

This is one of the simplest ways to improve your credit score, and stop paying extra money on credit card interest as well. Paying off credit card debt reduces your credit utilization ratio, which is a key factor in determining your credit score. Your credit utilization ratio takes the overall credit limit you have across all credit cards and compares it against your overall balances. So if you have an overall credit limit of $10,000 and $5,000 in balances, your ratio is 50 percent. If you pay off $4,000 of that debt, your ratio drops to 10 percent. The lower the credit utilization ratio, the higher your credit score.

Get a New Credit Card

This is one of the ways to improve your credit score that may seem counterintuitive at first. However, getting a new credit card is another way to lower your credit utilization ratio. That in turn will raise your credit score. If your overall credit limit is $10,000 and you have the same $5,000 in debt, getting a new credit card that raises your overall limit to $20,000 will drop your credit utilization ratio to 25 percent.

You can also use a new credit card to help you handle your debt and save some money. If you get a balance transfer credit card with a 0% introductory APR on balance transfers, you can transfer your balance and not have to pay interest on your debt for as long as the introductory period lasts. That will help you pay down your debt faster and avoid paying unnecessary interest. It will help raise your credit score as well!

Fix Errors on Your Credit Report

Millions of Americans have errors on their credit reports. Many don’t even know it. Some of these errors may not affect your credit score much, but if you are on the border between average and good credit, a few points added to your score could mean the difference of hundreds of dollars in interest. If you want to fix the errors yourself, get your three free annual credit reports (TransUnion, Experian and Equifax) from annualcreditreport.com and scan them for any errors. Each credit bureau’s website has information on how to report errors. Each process is different, so make sure you read all the directions carefully.

If you don’t want to go through the hassle of fixing your own credit report errors, you can hire a credit repair company to submit error fixes for you. However, keep in mind that there are many credit repair services that are scams. First, look for a reputable credit repair company that follows the rules of the Credit Repair Organizations Act; here is a good list of the top companies that are compliant and have a good BBB rating.

Second, make sure you are clear with the credit repair service that you ONLY want them to fix your errors. Some will try to convince you to do additional repairs. However, many of those fixes are not worth the money you’ll spend. Speaking of which, be prepared to spend at least a couple hundred dollars to use a credit repair service.

Negotiate With Your Lenders

Another service that credit repair companies provide that you can do yourself is negotiating with your lenders. Your lenders are the ones that report to the credit bureaus when you are late with a payment, default on an account or have an account sent to collections. Therefore, they also have the power to reverse some of these derogatory marks.

Generally, lenders don’t like to erase bad behavior on credit reports. This is especially true if it is something really bad, like an account in collections. However, if the items are really old and you have a recent track record of paying on time, they may be willing to help you out. And let’s be honest, it never hurts to ask.

Time Heals All Wounds

The most tried and true ways to improve your credit score is to give it time to heal. Beside bankruptcy, all derogatory items on your credit report will drop off after seven years. If you had credit trouble in your early 20s or your house went into foreclosure six years ago, it might be worth it to wait a year or two for your credit score to “forget” the bad years. Then after that you can apply for a car loan, new mortgage or even a credit card. Just remember, if your credit is ruined, it won’t stay that way. If you start paying every bill on time now, in seven years, you could have stellar credit.

Have you ever had to work to repair a bad credit score? What do you think was the best thing you did to help it? Can you think of other ways to improve your credit score?

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About Dee

Dee is a blogger and a mom who is passionate about personal finance. She started Color Me Frugal as a way to inspire and help others who may also be on a journey to debt annihilation and financial freedom. When she is not chasing after a toddler, she can often be found reading, writing, or planning her next biking trip! You can also find her on Pinterest and Facebook.

Comments

Over the years whenever we’ve opened a new card, I’ve always tried to get the highest credit limit possible. We use cards for all of our routine expenses and always pay them off, so I feel like it’s an easy (and often-overlooked!) way to help your score.

Wow, that’s incredible! I’ve also noticed since we started paying off debt in earnest that our scores have increased as well. I always thought you must have to be a millionaire or something to get a credit limit in the 800s- but that’s where ours are now since we’ve really reduced the amount of debt that we are carrying.

Dee,
Great article. I should probably look into my credit reports and see if there’s any errors!
However, one thing I don’t agree with is that lower credit utilization doesn’t necessarily mean better credit score, for example 0% utilization could be a flag to lenders because it doens’t show whether the borrower is capable of managing the payments.
I also wrote some posts about credit score in my blog here: http://www.allmycreditcards.com/want-a-perfect-credit-score-heres-what-you-need-to-know-part-1/
BTW, I found your blog from Yakezie forum – your blog is beautifully designed and I love the posts that I have read. Keep up the good work!
Charlie

Hi Charlie,
Great point about the 0% utilization. However, I think it could be said that in general a lower credit utilization is beneficial- 10% is certainly better than 90%. But I totally hear you that if a person isn’t using lines of credit at all it could make someone wonder what is going on.
Glad you found CMF on Yakezie! Thanks so much for your comments and for stopping by.

Excellent credit repair tips! Yes, it certainly does take time. It’s not an “overnight process” like many credit repair companies would have you believe. You need to allow time to see progress and results.

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